Key Takeaways
- Cipher Digital fell 21% today as AI data center stocks sold off for a second day after Democrats’ midterm wins.
- Texas’s governor-elect wants to pause data centers, a bigger threat to sites Cipher and CleanSpark haven’t leased than to signed ones.
- Google’s warrants cost Cipher more the further its stock falls.
- A neocloud with Texas sites reports tonight.
Cipher Digital (CIFR) fell another 21% today as the AI data center selloff that began with Democrats’ midterm wins ran into a second day.
CleanSpark (CLSK), downgraded alongside Cipher by Keefe Bruyette on Wednesday, shares its Texas risk.
A governor who wants a pause
Every Cipher campus is in Texas, and on Tuesday, Texans elected Gina Hinojosa governor over Greg Abbott. She campaigned on halting data centers there until lawmakers pass protections.
Keefe Bruyette’s Stephen Glagola downgraded Cipher to Market Perform on Wednesday over the race, cutting his target to $9.50 from $11. Chip stocks extended their losses too: Applied Materials (AMAT) is down 12%.
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The next campus carries the risk
My read: a new governor can slow Cipher’s next campus more easily than one already built. Black Pearl’s rent started in August, and Barber Lake’s tenant has begun moving in. Colchis and the other sites awaiting grid approval were already stuck after Abbott paused new connections in August.
Analysts expect Cipher’s revenue to jump from $215 million this year to $849 million in 2027 as rent arrives:
That rent is already signed, so I don’t expect big estimate cuts. And AI labs are still signing in Texas: Riot Platforms leased its Corsicana campus to one this week for $28 billion.
The stock already prices in plenty of doubt at 3.9x forward sales, against a three-year average of 11.4x:
The real risk is funding. With the stock well below the roughly $16.60 break-even on Google’s warrants, Cipher owes Google the gap in shares or cash when Barber Lake’s lease starts.
Texas questions for IREN and CleanSpark
IREN (IREN), down 21%, builds at Sweetwater, Texas, and at Childress, where three more Microsoft deployments are due in the fourth quarter. Tonight, watch for any change to its Texas power and permitting timelines.
The tenant leasing CleanSpark’s Georgia campus holds exclusivity over up to 885 megawatts in Texas, but nothing is signed, and Austin County, home to its Sealy site, paused AI data centers in July.
Where I land on Cipher
The market is pricing Cipher’s signed leases as if Texas could take them back, which looks too harsh to me. Of course, Hinojosa doesn’t take office until January, so how hard she pushes is still a guess.
So what is Cipher Digital stock actually worth?
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